5 Steps Toward Creating Your Own Estate Plan

If you haven’t already created an estate plan, consider starting now.

Although every estate planning process is different, as a guide it can be helpful to have a step-by-step plan for you to follow as you go through what can often be an overwhelming process. 

Remember that a lot can change over the years, both in your own life circumstances and due to changes in laws and regulations. If you have an estate plan but have not reviewed it for some time, now is the time to do so.

Mark down any questions you have along the way and consider reaching out to an attorney or tax advisor.

Take stock of everything you own

Make a list of assets you want to pass on and indicate which recipients should receive them if you want to ensure the asset is handed down correctly. Among the properties you may own are your primary residence, as well as any vacation homes or rental properties you may own.

In addition, make sure you gather all the statements for your investment accounts, bank accounts, retirement accounts, annuities, and insurance policies. Parents should also make sure they gather statements for their college 529 plans.

Include any items of special value in your inventory list, such as collectibles, vehicles, jewelry, and other physical possessions you want to pass on.

Get advice

You can consult with an attorney, tax advisor, or even a certified financial planner to create estate planning documents, ensuring that the items you included in your inventory are passed on properly. The following documents will assist you in this process:

First, write a will. An estate plan specifies how assets should be distributed following your death and how dependents should be cared for. A strong will should be in writing and signed by you and a witness.

Consider creating a trust. In the process of creating a trust, you are able to designate someone-the trustee-to hold assets on behalf of your beneficiaries or charities.

A trust is a legal document in which you dictate how and when the trustee is to release assets. It may sound similar to a will. However, a trust does not go through probate, enabling your beneficiaries to receive assets more quickly.

Write a living will

For those concerned about their health and worried that they will not be able to make their own healthcare decisions in the future, they may wish to consult a lawyer and draft a living will, also known as an advanced healthcare directive.

If you lose the ability to make decisions on your own and become incapacitated, this document informs your doctors of your medical preferences. You can also appoint a health care proxy.

Choose who will carry out your estate plan.

You should name an executor. In addition to overseeing the settlement process, the executor of your will ensures that all of your terms are carried out.

There may be more than one executor named and several co-executors. It’s important for an executor to have some financial knowledge because they’ll handle the financial aspects of your will, including distributing wealth to beneficiaries or charities and making sure taxes are paid correctly.

In the event that you have dependents, such as children or adults who need assistance caring for themselves, you should name a guardian who will take care of these dependents. As part of your will, you are usually required to name a guardian.

There are no specific rules regarding who may be named guardian. The person could be a family member or a close friend.

A trustee is the person you choose to administer the trust you have established. The trustee is responsible for managing the trust and making distributions at the appropriate times. You can select an individual trustee, or you can choose a firm to manage your trust.

Finally, a healthcare proxy is someone who can make medical decisions on your behalf if you are unable to make them yourself. Each state determines the scope of this person’s authority, so the exact details may vary.

Update regularly

It’s important to keep your estate plan updated as your wishes or laws change. Some things to always keep updated include:

  • Legislative and regulatory changes
  • Changes in your choice of executor, trustee, or guardian
  • Beneficiaries listed in your plan may need to be updated
  • Are there any new assets you need to include in your plan?

Estate planning typically requires the help of a professional, however many of the forms and documents can be completed on your own online.